Any pension scheme trustee interested in chancellor George Osborne’s plan to invest in UK infrastructure would be forgiven for deciding to lie down in a dark room until the feeling subsides.

Fact is, just about every government infrastructure project ever to get approval produces cost overruns, disputes and revenue disappointments. Maybe this time it will be different, but Osborne will need to structure the opportunity with enormous sensitivity. Pension schemes are suffering quite enough, without being encouraged to own illiquid stakes in malfunctioning government projects.

Governments want business support, but do not know how to support businesses. Their vision gets in the way of operational issues. And speculators, dazzled by state support, put too much capital at risk.
Lord David Freud, now government minister for work and pensions, is in a good position to inform the debate, after raising large sums on the stock market to develop Eurotunnel and Euro Disney when he worked at Warburg in the 1990s.

Neither delivered success to investors, despite pleasing quite a few politicians. With refreshing candour, Freud later said of Eurotunnel: “As the marketer of the issue, I had successfully sold the market a pup.”
Over at the Olympics, the head of the National Audit Office, Amyas Morse, recently questioned whether it could be completed within its £9.3bn budget.

The Olympics budget was first set at £2.4bn in 2004 to get then-chancellor Gordon Brown’s support. It is not uncommon – in fact it is standard practice – for contractors to bid low to win projects and raise their charges later. Litigation is often the result.

The National Health Service and London Underground are among the state bodies lumbered with cost overruns, penalty payments and interest charges through Brown’s public-private partnership deals.
In 1999, the then-prime minister Tony Blair was sufficiently entranced by the technology boom to urge pension schemes to invest more in it. He even persuaded consultants Watson Wyatt, Mercer and Bacon & Woodrow to pen a mildly supportive letter.

Less than a year later tech stocks tanked and pension schemes could emerge from their dark room, congratulating themselves on avoiding another disaster.

More recently, Blair became an adviser to Khosla Ventures, which has a good track record in technology ventures. But its founder Vinod Khosla has not found it so easy to expand in clean energy where state subsidies continually distort the economics of the industry. Across the world, subsidies are now being removed because governments are trying to save money, jeopardising a new generation of investors sucked in through venture capital or the stock market.

Britain’s solar backers came unstuck only last year, when former energy secretary Chris Huhne was suddenly persuaded that seriously large subsidies should cease.

The squeeze has intensified because the subsidies of previous years have led to an oversupply of products hitting the market at exactly the time as orders are falling. But the good news for society is that the innovation triggered by investment has led to a collapse in the price of producing solar and wind energy. Warren Buffett is buying a solar farm development in California, believing clean energy can be a serious cashflow generator.

In the same way, Eurotunnel has become accepted by motorists. Euro Disney is attracting plenty of tourists. Londoners (for the most part) are looking forward to the Olympics. Infrastructure laid down for the digital highway of the 1990s is forming part of the new social media revolution.

But pension schemes presented with the opportunity to get in on the ground floor would do well to view such opportunities with a jaundiced eye. They should also be alert to where government-inspired disasters are likely to hit. And the next one promises to be a doozy. It’s called China.